Gradual reduction of tax ratio could mean greater savings for tenants than if reduced in one year

Oxford County council's decision to reduce the multi-residential tax ratio by 0.74 over four years could have a greater benefit to tenants than doing it all at once.

"The decision they made to phase it in over that four-year period is definitely going to be a benefit to the tenants, because the landlord tenancy act is going to have to be done on an annual basis," director of corporate services Lynn Buchner said.

"So there's more opportunity for the tenant to save over that fouryear period, than if we had made that adjustment from 2.74 all the way down to 2.0 in one year."

As part of the 2016 fall economic statement, the provincial finance minister announced all municipalities with a multi-residential tax ratio over 2.0 would be required to reduce their ratio or be subject to a levy restriction, which would mean that no portion of a levy increase could be imposed on the multi-residential tax class.

Since Oxford County's multiresidential tax ratio was 2.74 in 2016, the decided it would reduce the ratio to 2.555 in 2017 as a planned four-year migration to 2.0 by 2020.

This decision to spread the reduction over four years is expected to achieve more rent reductions during the migration period, compared to if the reduction was implemented in a single year.

As far as the impact from this year's ratio reduction, tenants have seen savings of approximately $76,000, while landlords have seen a significant benefit of approximately $920,000 in savings.

Buchner explained that while all landlords will see some savings, not all tenants are going to.

"It doesn't flow all the way down to the multi-residential units, necessarily," Buchner said. "It only flows through to the landlords and then the landlord tenancy act kicks in, but only if that tax reduction to them is greater than 2.49 per cent. In that event, they are required by law to flow a portion of the savings down to the tenants."

According to the staff report prepared by Buchner, the Residential Tenancies Act of 2006 required that landlords of residential units to pass through an automatic rent reduction to tenants if the property taxes for the year decrease by more than 2.49 per cent in comparison to the previous year.

Oxford County council will review the impact of its decision at its next meeting on Wednesday.